Planning for Retirement: What Retirees Fear and Do Not Understand

Saving for retirement is important. If you start early, save consistently, and regularly monitor your investments, you hope you will have accumulated enough for retirement.  But how much is really enough?

A study in BMO Wealth Management, “The Aging Economy: Improving with Age,” found that many Americans have significant concerns about their retirement years.  They fear that health and financial woes will impact the security of their retirement years or that they will become a burden on their families.

The study found that the primary retirement concern is outliving their savings.  Today, the average life expectancy is 76 for men and 81 for women.  As people live longer, their retirement savings must also last longer.  According to the study, 44% of respondents fear that they will run out of money.  This is a valid concern.  Only 10% of retirees have adequate savings to maintain their pre-retirement lifestyle.  Even those who think they have enough savings may not.  Inflation can erode the value of savings, meaning that you will need more money each year just to maintain the same standard of living. At current trends, inflation will destroy 50% of retirement savings every 22 years.

Another concern is taxes.  A recent survey by the Nationwide Retirement Institute found that 37% of retirees had not considered how taxes would impact their retirement when planning and 70% of retirees either had no knowledge or were only somewhat knowledgeable about taxes. Since retirement income will be reduced by taxes, it is important to understand the impact of taxes, when planning for retirement.

A third concern is medical and long-term care expenses.  Even with Medicare, a retiree will fact increased costs for gap coverage and out-of-pocket expenses.  In addition, long-term care may be needed if either you or your spouse becomes unable to manage everyday activities. Long-term care is expensive, and the cost is growing at a rate faster than inflation. With people living longer, the likelihood of needing long-term care increases. Planning for retirement means that you must account for medical expenses and long-term care in your retirement budget. To illustrate, the Employee Benefit Research Institute determined that a 65 year old couple with median prescription drug expenses would need $296,000 in savings to have a 50% chance of having enough money to cover their health expenses in retirement. If they wanted 90% odds of covering these costs, they would need $400,000 in savings.

How can you overcome these retirement concerns?  Call the RMC Group.  We work with advisors and their clients to develop the most effective retirement program to meet the needs and goals of people planning for retirement.  Our approach to retirement planning is comprehensive and process-driven.  We guide our clients to a better retirement strategy.  We begin with an analysis of the client’s needs and goals. During this process, we examine each factor impacting retirement and will you and your client design, implement and administer the right retirement plan to achieve your client’s financial goals and retirement needs.

To learn more about our pension or retirement planning process, contact RMC today at 239.298.8210 or [email protected].